Gold Prices Experience Historic Crash, Losing Over ₹44,000 Per 10 Grams
Gold prices, which had enjoyed an uninterrupted bull run over the past year, have taken a dramatic nosedive in recent trading sessions. This sharp decline marks one of the most significant crashes in recent market history, shaking investor confidence in the traditional safe-haven asset.
Sharp Decline in Trading Sessions
During Friday's session, gold prices on the Multi Commodity Exchange (MCX) plummeted by nearly ₹20,000 per 10 grams, settling at ₹1,49,653. This substantial drop came after gold had climbed almost 25% since the beginning of January. The sell-off erased the majority of those gains, bringing the monthly return down to 10.5%, though the metal still maintains an eight-month bull run.
Even after this sharp crash, gold prices extended their losing streak during the special trading session on February 01. February delivery contracts fell another ₹13,648, representing a 9% decline, to reach ₹1,36,185 per 10 grams.
Overall Impact and Yearly Performance
The latest crash has brought the gold rate down by ₹44,594 per 10 grams, or 25%, from the recent peak of ₹1,80,779. This dramatic reversal comes after a stellar yearly performance where gold prices finished with an impressive gain of 76.5% in the previous calendar year. Sustained buying from global central banks had previously pushed the metal to historic highs.
Silver prices have also remained under significant pressure during this period. March delivery contracts on MCX fell another ₹2,65,652 per kilogram from ₹2,66,273, now trading ₹1,54,396 below the peak of ₹4,20,048.
Four Key Factors Behind the Gold Price Crash
Warsh Nomination as Federal Reserve Chair
The primary trigger for the gold sell-off was the nomination of Kevin Warsh as the next US Federal Reserve Chair. This development fueled market speculation about a more hawkish monetary policy approach and potentially higher interest rates under his leadership.
Market movements suggest traders are dialing back expectations for policy easing under Warsh, who served as a policymaker from 2006 to 2011. During his previous tenure, Warsh often emphasized inflation risks, even as other officials focused on supporting growth and employment during the financial crisis.
Firm US Dollar Strength
The nomination of Warsh also boosted demand for the US dollar, which strengthened by 0.73% in Friday's session to reach 96.99. A stronger dollar makes dollar-priced precious metals like gold more expensive for holders of other currencies, creating additional downward pressure on gold prices.
Margin Increases by CME Group
Amid sharp volatility in both gold and silver prices, CME Group announced increases in margins for COMEX gold and silver futures. According to exchange statements reported by Bloomberg, gold margins will rise to 8% of contract value from 6% for non-heightened risk profiles.
Similarly, silver margins will climb to 15% from 11% for non-heightened risk profiles, while heightened risk profile margins will increase to 16.5% from 12.1%. These margin hikes make trading more expensive and can contribute to selling pressure.
Profit Booking After Record Rally
The sharp rally in gold prices, which saw prices in India jump ₹80,000 per 10 grams in a record eight months, appears to have prompted significant profit booking by investors. This natural market correction after such substantial gains has contributed to the current downward pressure.
Market Outlook and Expert Analysis
Ponmudi R, CEO of Enrich Money, provided insight into the current market situation: "The price has slipped back toward the ₹1,36,000 region, indicating heavy profit booking and long liquidation rather than healthy consolidation. Although the broader long-term trend was bullish, the recent move clearly reflects distribution at higher levels."
He further added: "Immediate stability is required above ₹1,32,000–₹1,35,000 to avoid further downside extension. Until price regains ₹1,45,000, rallies are likely to face supply, keeping the near-term outlook cautious to corrective."
The expert emphasized that the rising channel support has been decisively tested, and momentum has shifted into sell-on-rise mode, suggesting continued caution in the near term.
Disclaimer: Investors are advised to consult with certified experts before making any investment decisions regarding gold or other precious metals.
